Cannabis Industry Daily News

IRS debuts initiative to help cannabis companies pay taxes properly

By MJBizDaily Staff

The IRS launched a program aimed at helping businesses in state-legal cannabis markets pay their federal taxes properly under 280E, the onerous section of the U.S. tax code that disallows standard deductions for such businesses.

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The program, titled the “Cannabis/Marijuana Initiative,” was announced on the IRS website and written by De Lon Harris, commissioner of the IRS’ Small Business/Self Employed Examination division.

“The goal of this initiative is to implement a strategy to increase voluntary compliance with the tax law while also identifying and addressing non-compliance,” Harris wrote, highlighting the fact that the IRS website also has a specific information page for those in the cannabis space.

Harris wrote that the new program will entail:

  • More training and job aids for IRS agents conducting marijuana business audits.
  • “Coordination and a consistent approach” by the IRS toward the entire cannabis industry.
  • Figuring out new ways “to identify non-compliant taxpayers.”
  • Collaborating with “external stakeholders” to educate more in the industry as to their tax obligations under 280E.
  • Disseminating more information to those in the industry on how to comply with 280E.

“This is a truly groundbreaking effort for our agency,” Harris wrote.

Harris added that he’s been conducting outreach to those in the industry and has spoken at three cannabis industry events in the past year.

“Through this extended outreach, we hope to help small business owners and others fully understand the unique tax rules before there are any compliance issues,” Harris wrote.

He clarified, however, that “cannabis/marijuana business owners also need to understand that all cash-intensive businesses can be, and are, audited.”

Marijuana REIT purchases New York property in deal that will total $56.3M

By MJBizDaily Staff

Innovative Industrial Properties is extending its real estate relationship with a multistate marijuana company after purchasing more than 92 acres in New York next to one of the real estate investment trust (REIT)’s properties leased to Goodness Growth Holdings.

According to a news release, the purchase price of the land was $10.2 million.

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Minneapolis-based Goodness Growth plans to build out a licensed cannabis cultivation and processing facility on the land.

According to the release, San Diego-based Innovative Industrial Properties (IIP) and Goodness Growth will partner on the development of 324,000 square feet of industrial space.

IIP is expected to reimburse Goodness Growth up to approximately $46.1 million for the construction of the facility, making the total value of the deal $56.3 million.

With this deal and another property IIP leases to Goodness Growth in Minnesota, the two companies partner on roughly 453,000 square feet of industrial and greenhouse space and a total commitment of approximately $72.8 million.

The cannabis REIT owns more than 75 properties across the U.S.

Innovative Industrial Properties trades on the New York Stock Exchange under the ticker symbol IIPR.

Minority Cannabis Business Association launches in Maryland

By MJBizDaily Staff

In anticipation of the Maryland Legislature legalizing adult-use cannabis in the near future, two ex-politicians turned lobbyists formed a new trade organization dedicated to ensuring that people of color get a solid stake in the upcoming industry.

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According to online news outlet Maryland Matters, former state Delegate Michael Arrington, a Democrat, and former state GOP chair John Kane have teamed up to found the Annapolis-based Maryland Minority Cannabis Business Association (MMCBA).

The organization will “serve as the voice for minority businesses to guarantee opportunity, education, and equality for the communities devastated by the war on drugs,” according to a news release.

Arrington said he and Kane want to avoid a repeat of the state’s MMJ licensing in 2015 and 2016, when the vast majority of business license winners were white in a state where a third of the population is Black.

Adult-use measures with a focus on social equity and industry diversity stalled in the Maryland Legislature this year, but the state is considered a strong candidate to legalize recreational sales.

The MMCBA’s advisory board includes:

  • Former Baltimore Mayor Jack Young.
  • Ex-Maryland Special Secretary of Minority Affairs Sharon Pinder.
  • Businesswoman Sophia Jyeh-Shin Parker.
  • Maryland Black Chamber of Commerce co-chair Don Moragne.

Marijuana Company of America borrowing $10 million to expand

By MJBizDaily Staff

Los Angeles-based cannabis holding company Marijuana Company of America (MCOA) raised $10 million via an equity line of credit agreement with White Lion Capital.

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The proceeds will be used “to drive growth,” MCOA said in a Tuesday news release.

Specifically, the release noted, the funding will “facilitate MCOA’s strategic plan to expand its business by organic growth and acquisitions of synergistic and often undercapitalized assets.”

“This credit line is expected to afford MCOA to offer a compelling structure that will enable one or more target acquisition companies to go public, thereby accessing capital for both entities.”

MCOA’s products include hemp-derived CBD brand Hempsmart and recently acquired CBD product distributor cDistro.

MCOA shares trade on over-the-counter markets as MCOA.

Massachusetts regulator criticizes local ‘impact fees’ for cannabis firms

By MJBizDaily Staff

The practice in which Massachusetts municipalities levy “impact fees” on cannabis companies that operate within their jurisdictions is drawing increasing criticism, including from a top state marijuana regulator.

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According to The (North Andover) Eagle-Tribune, the fees came under fire Friday when Steven Hoffman – who chairs the Massachusetts Cannabis Control Commission – said he’s skeptical of the town of Haverhill’s claims that three marijuana shops are costing the municipality $1.3 million annually.

Officials sought to cover those costs – mostly attributed to increased police staffing and resources – by charging the cannabis businesses “impact fees.”

“We built a big industry, but it’s not a new industry as it’s replacing an illicit industry that has existed for decades,” Hoffman said, the newspaper reported.

“So, things like training police on DUI and drug education has been going on for a long time and has nothing to do with the introduction of a legal business replacing an illegal business, therefore, a lot of the incremental expenses cities and towns are saying they are incurring – I just don’t buy.”

Though impact fees have been part of the cost of doing business for Massachusetts marijuana companies since the state’s recreational market debuted in 2018, the practice has sparked litigation in Haverhill.

The lawsuit against the town of Haverhill, filed by retailer Stem, is ongoing.

State lawmakers, meanwhile, are debating whether to put “impact fees” under the jurisdiction of regulators. That could mean the practice will eventually be brought to a halt.

Mississippi lawmakers request special session to legalize medical marijuana

By MJBizDaily Staff

Mississippi’s legislative leaders asked Gov. Tate Reeves to call a special session to consider a medical marijuana measure and tackle other legislative issues.

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The Associated Press reported Friday that the Republican governor’s spokeswoman, Bailey Martin, said lawmakers and the governor’s staff discussed the possibility of a special session this fall, “and we are looking forward to engaging further.”

Lt. Gov. Delbert Hosemann and House Speaker Philip Gunn, both Republicans, told reporters the special session could be completed in as little as one day.

A Mississippi legislative group last week agreed on a proposed medical marijuana program, four months after the state Supreme Court voided a business friendly, voter-approved MMJ ballot initiative.

The legislative proposal is more limited than the citizen initiative, which the 2021 MJBizFactbook had projected would have generated $265 million in sales in the first full year of the program and $800 million annually by the fourth year.

For example, the legislative proposal would enable local governments to opt out of the program in their jurisdictions, according to the Associated Press.

The bill also reportedly would require a three-fifths majority to pass, but legislative leaders said they believe there are enough votes for approval.

Michigan recalls cannabis processed with contaminated trimming machine

By MJBizDaily Staff

Michigan regulators issued a voluntary product recall for several batches of cannabis trimmed with a machine by Kalkaska cannabis company Glo.

According to the bulletin from the state’s Marijuana Regulatory Agency, the trimming machine was contaminated with chemical residue from insecticide bifenthrin and pesticide chlorfenapyr.

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Eight batches of cannabis were affected.

The contaminated products were sold or on the shelves at:

  • Mint Cannabis (Kalamazoo).
  • Authentic 231 (Manistee).
  • Fluresh (Grand Rapids).
  • The Woods Cheboygan.

Marijuana retailers who sold these contaminated products are required to display the recall notice on the sales floor, visible to all customers, for 30 days.

An MJBizDaily message seeking comment from Glo was not immediately returned.

Oregon hemp producers discovered growing marijuana illegally

By MJBizDaily Staff

(A version of this story first appeared at Hemp Industry Daily.)

More than 100 licensed hemp producers in southern Oregon have been found to be growing marijuana illegally, according to a top cannabis regulator.

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Members of the Oregon Liquor and Cannabis Commission (OLCC), which regulates adult-use marijuana in that state, learned recently that 54% of roughly 212 registered hemp grows in Jackson and Josephine counties were found to be growing marijuana in recent checks, Jefferson Public Radio reported.

Oregon hemp farms are under increased scrutiny after passage of a new law that aims to crack down on unlicensed marijuana production among Oregon’s hemp operators.

The OLCC and the state’s agriculture department are screening growers, starting with operations in southern Oregon, in a joint operation.

“I believe from my experience down there, there are more illegal grows than there are registered grows,” said Richard Evans, the OLCC’s senior director of licensing and compliance.

It wasn’t immediately clear how hot the noncompliant hemp was in the recent checks. The agency did not identify any of the suspected illicit growers.

The new Oregon law sets a 10% THC threshold before licensed hemp growers face penalties for growing marijuana. The law calls for fines up to $10,000 but no criminal penalties.

Federal law protects licensed hemp growers from criminal negligence prosecution if their plants exceed 0.3% THC but not more than 1%.

Nevada cannabis cultivator Flower One raises $5 million in private placement

By MJBizDaily Staff

Nevada cannabis cultivator Flower One Holdings raised $5 million in the first tranche of a nonbrokered private placement.

Flower One has the option to increase the size of the private placement by an additional $10 million.

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Proceeds will be used “for implementing critical improvements to (Flower One’s) facilities and for general corporate and working capital purposes,” according to a Monday news release.

Flower One restructured its convertible debentures to reduce its debt earlier this year.

“As we have indicated since the restructuring, there are critical improvements that need to be made to the facility in order to assure we are able to produce at the quality and consistency levels required to achieve our corporate objectives,” Flower One CEO Kellen O’Keefe, formerly of MedMen, said in the release.

Under the private placement, Flower One issued 50 million units, which each include one common share and one share purchase warrant exercisable at $0.25 for three years.

Flower One can accelerate the expiry date of the warrants under certain conditions.

The Las Vegas- and Toronto-based company describes itself as “the largest cannabis cultivator, producer, and full-service brand fulfillment partner” in Nevada.

The company has a primary greenhouse and production facility and a second site that includes an indoor cultivation facility and a kitchen.

Flower One shares trade as FONE on the Canadian Securities Exchange and FLOOF on over-the-counter markets.

3 more businesses sue Illinois over unsuccessful marijuana license bids

By MJBizDaily Staff

Three companies seeking marijuana business licenses are the latest to file suit against Illinois regulators, alleging their applications for cultivation and transportation permits were wrongly rejected or that they weren’t given an opportunity to rectify errors.

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According to Law360, the plaintiffs include Prairie State Cannabis, Cannabus and ia GP, all of which filed suit in Cook County Circuit Court last week.

Lawsuits brought by losers in competitive bidding processes have long been the norm in the cannabis industry, and plenty of marijuana licenses in legal U.S. markets across the nation have been won through such lawsuits.

But Illinois has had more than its fair share of litigation over its marijuana licensing process and its social equity program.

For example, when state regulators announced in fall 2020 that only 21 of 900 applicants would be considered for a pool of 75 retail licenses, lawsuits followed.

And when the state announced a new plan to allow applicants to correct errors in their paperwork, even more lawsuits were filed.

Florida yet to license Black medical cannabis cultivator

By MJBizDaily Staff

Florida’s medical cannabis program still hasn’t issued an MMJ cultivation license to a Black farmer, even though lawmakers reserved a license for one when the MMJ legalization law was passed in 2017.

Lawmakers recently pressed the state health department about the issue, according to Jacksonville TV station WJXT.

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State Sen. Darryl Rouson brought the MMJ regulatory agency before the Senate Agriculture Committee seeking an explanation for why the license hasn’t been issued when 22 others have.

The health department said a lawsuit challenging the state’s seed-to-sale tracking requirement for cannabis companies is causing the delay.

Three Florida cannabis companies control more than two-thirds of the market, with the top six accounting for nearly 90% of all sales.

So, even if a Black cultivator received a license tomorrow, it would be an uphill climb to compete with those established companies.

In 2018, the Florida Senate passed HB 6049, which removed the provision that a Black cultivator must be a member of the Florida chapter of the Black Farmers and Agriculturalists Association to be eligible for the MMJ business license.

That was after the state Legislature mandated in 2017 that a new license be awarded to a member of the Pigford-versus-Glickman lawsuit after the federal government was found to have discriminated against Black farmers.

According to WJXT, Christopher Ferguson, director of Florida’s Office of Medical Marijuana Use, said the agency anticipates moving forward with the Pigford licensing process in the coming weeks.

Mississippi legislative group reaches agreement on medical marijuana plan

By MJBizDaily Staff

A Mississippi legislative group agreed on a proposed medical marijuana program that would be more limited than what voters overwhelmingly approved at the ballot box last November.

The proposed measure, for example, would enable local governments to opt out of cultivation, processing and retail sales in their jurisdictions, according to the Associated Press.

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But residents could petition for an election to reverse that decision.

In addition, cultivation would be required to be indoors, the AP reported.

The next step is for the state’s legislative leaders to ask Republican Gov. Tate Reeves to call a special session so lawmakers can pass the proposed measure into law.

The lead negotiators for the state House and Senate, according to the Associated Press, said the bill would require a three-fifths majority to pass because tax issues are involved, but they believe there are enough votes for approval.

The agreement on a proposed measure comes four months after the state Supreme Court struck down the MMJ ballot initiative, derailing what was expected to be a large, business-friendly MMJ market in the Deep South.

The loss was believed to be the first time an MMJ initiative has been overturned after residents approved it at the ballot box.

A majority of the Supreme Court justices ruled the initiative was invalid because it didn’t meet the state’s requirement that 20% of the signatures come from each of five congressional districts.

The outdated requirement was impossible to meet because Mississippi lost a congressional district after the 2000 Census.

The 2021 MJBizFactbook had projected that a Mississippi medical cannabis industry based on the citizen-backed initiative would have generated $265 million in sales in the first full year and $800 million annually by the fourth year.